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Cambridge University endowment gains 8.8%; Oxford ‘flat’ for 2018

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Cambridge University’s £3.2bn (€3.6bn) endowment fund posted an 8.8% investment return for the 12 months to 30 June 2018 – just under half its 18.8% return for the previous 12-month period.

The fund, managed by the university’s investment office, finances university posts and activities and includes several of its colleges as investors.

Over 10 years to the end of June last year, it generated an annualised return of 10%.

Last year’s stellar return was achieved partly through an increase in the dispersion of individual stock returns in the second half of the year, which favoured active management, Cambridge said. This helped the endowment’s equity and hedge fund managers outperformed their benchmarks.

During 2018, according to Nick Cavalla – then Cambridge’s CIO – the fund’s holdings in private equity and other alternative asset classes performed strongly. Alternatives included direct property, private credit and absolute return.

In terms of public equities, Cavalla said the US was the strongest performing regional stock market, fuelled by significant advances in large-cap technology stocks.

Kings College, Cambridge

Kings College, Cambridge

He said: “[Cambridge’s] public equity portfolio underperformed its market index benchmark, in part because of an underweight to the US market and technology as a sector, but also because of some idiosyncratic exposure to portfolio companies that emerged as ‘value traps’, in the UK in particular.”

At end-June 2018, Cambridge’s portfolio was invested 59% in public equities, 11% in real assets including property, 10% in absolute return and 9% in private investments.

Cavalla has since left the Cambridge endowment to lead family office Talisman Global Asset Management as CEO.

Meanwhile, Oxford University’s £3.4bn endowment fund made a “flat” investment return to end-December 2018 over what was a volatile and challenging year for all financial assets, according to Oxford University Endowment Management (OUEM).

Oxford University

Oxford University

“It would be remiss not to mention that 2018 itself saw periods of negative equity returns and elevated volatility,” the managers said. “The fund’s equity exposure is significant and not immune 
to such volatility.”

The fund – run on behalf of Oxford University and a number of individual colleges – returned 9% a year on average over the past decade.

Public equities finished the year with an allocation of 53.6%, slightly up on the previous year, although the managers increased cash holdings as valuations in public and private equity markets continued to rise. The private equity allocation totalled 22.3% at the end of December.

Oxford’s public equity managers returned 10.6% annualised over the past 10 years, OUEM reported. Private equity annualised returns over 10 years were 13.9%.

The endowment’s 2017 return was 9.2%, due in part to a flexible currency strategy benefiting from sterling’s movements after the UK’s EU membership referendum in June 2016.

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